Ladies and gentlemen, thank you for standing by, and welcome to the U.S. Physical Therapy Q1 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Chris Reading. Thank you. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to U.S. Physical Therapy's first quarter 2020 earnings call. I'm currently in our office with Larry McAfee, Executive Vice President and CFO. With us on the call include Graham Reeve and Glenn McDowell, our COOs; Jon Bates is here with us in the office as well. Jon is our Vice President and Controller; Rick Binstein is on the line, our Vice President and General Counsel. Sorry for the background noise. I'm next to a fire house. Before we begin to cover our results for this more complicated than normal first quarter, I'll ask Jon to cover a brief statement.

Thanks, Chris. This presentation contains forward-looking statements, which involve certain risks and uncertainties. And these forward-looking statements are based on the company's current views and assumptions, and the company's actual results can vary materially from those anticipated. Please see the company's filings with the Securities and Exchange Commission for more information.

Thanks, Jon. In my comments this morning, I'm going to try to paint the picture of our early quarter pre-COVID for the purposes of this discussion, which will be the January and February months and then the post-COVID period, the period of March. Importantly, I'll discuss steps we took quickly in advance to prepare us for the impact we began to feel acutely as communities began to ultimately adjust in early to mid-March. I will also discuss how the steps have meaningfully and positively impacted the safety of our staff and patients, service to our partners, and our financial performance, including our visits, revenue, and especially important, our cash position and overall trajectory. To be sure, this has been a supremely challenging period. However, I am so very proud of how our teams have led throughout this COVID-19 experience. First, January and February. Volumes started up strong again to begin the year, and in fact, same-store volumes picked up again from what was an excellent same-store at the end of 2019. We began the year in January and February with 5.9% same-store visit growth. Visits per clinic per day improved from 26.5% in 2019 to 27.7% in the first two months of 2020. Our revenue increased for this period approximately 8.3% after adjusting for the sale of a single partnership that we transacted on and sold last June. And our overall volumes grew by 9.7%. Despite the impact related to community closures and stay-home orders which began to accelerate in mid-March, we grew revenues on an adjusted basis by 2% for the quarter overall. This was in spite of an estimated $8 million revenue and contribution margin loss in the month of March, secondary to the COVID-19 pandemic. In our industrial injury prevention business, revenue was up for the quarter over 43%, and the revenue impact in the quarter was much less than in our physical therapy business. One exceedingly bright spot in the first quarter relates to several of our large Briotix Health clients signing expansions of their existing contracts, which we began to step up for as things began to unravel in other parts of the economy. Costco has been exceedingly helpful throughout this time. This graciously expanded our service location footprint with them in order to assist us in keeping our workers active, resulting in significantly less furloughs in this part of the business. There have been a number of other bright spots as we have worked our way through the early stages of this pandemic. One of those has been our teams' rapid deployment of Telehealth, which has been widely adopted and utilized by our partners. That was especially important during the height of the shelter in place orders, where Telehealth quickly became a meaningful and effective bridge for those who were unable or unwilling to come to our clinics for therapy. Special thanks to Ben Keeton, one of our very important partners for his assistance with this program. We expect to become part of the fabric of our alternative care delivery as we move forward. Another bright spot was the across-the-board designation of physical therapy as an essential health service, which allowed us, with cautionary safety measures, to keep the overwhelming majority of our facilities open throughout this time. We remain actively working through our APTQI Alliance and a recent investment in a lobbyist with APTQI to keep the progress and ground we obtained with Telehealth and other positive adjustments as we work our way through to a more normal post-pandemic period at some point. Part of the pandemic accelerating in the U.S., we went through a preparatory drill of sorts to evaluate our readiness to function remotely should it come to that, and of course it did, which we have been doing now. We've been functioning remotely for the majority of these past few months. Early start enabled us to purchase needed equipment computers, which has allowed our team to make a rather seamless transition to remote work to ensure the safety of our Houston team, most of whom work in a large central office where we provided the needed communication service and support to our partners, who are fighting the fight on the front lines as they come in and care for our patients each and every day. Today, we can say that we will be back in the Houston office on a rotating shift basis for the near-term to better understand the science around the progression in transmission of disease as sites begin to reopen. To date, our clinical services team has done a terrific job keeping us all abreast of the latest updates and thinking around the signs. We in turn have kept our partners and staff informed so that we have been able to remain operational with a very minimal amount of exposures and infections. Because we were able to act quickly and make adjustments to staffing through a variety of measures, including reductions to wages, hours worked, furloughs, and other means, along with making some strategic decisions to close a small percentage of our facilities. As a result, our cash position has remained strong and certainly stronger than we initially projected. Along with the advanced payments by Medicare of approximately $12.5 million, CARES Act payments of approximately $5.7 million, today our cash position is currently approximately $110 million. At the same time, we are seeing weekly improvements in new patient referrals and overall patient volume. We are now solidly above 60% of our pre-COVID visit levels and still trending forward. At this point in time, we are beginning to bring back select staff as volume warrants, and I think we are doing that for the most part on a PRN and as volume dictates basis. Additionally, Briotix has continued to do well. While some of our client companies have closed or are operating with restricted hours or personnel, that has curtailed our revenue somewhat. Our team has been able to offset some of those reductions with new or expanded business. Currently, we estimate that we are off in our Briotix Health business somewhere between 10% to 15% compared to our pre-COVID levels, but that is an improvement over the prior month. Our partners and our Houston teams have both done well throughout these past difficult months. We are ready to ramp back up safely, and we look forward to what we hope is a gradual progression back towards ultimate normalcy. That concludes my prepared comments. I am going to turn things over to Larry to cover financials in more detail.

Hi, thanks Chris. Typically at this point, I would discuss each line item quarter-over-quarter, but honestly that would be a mismatched comparison. So I’ll focus on a few key points. In this quarter, we had closure costs of approximately $3.8 million, which we will address. Half of that amount consisted of non-cash charges related to the write-off of goodwill and trade names, among others. The remaining costs were due to equipment that we were unable to salvage, severance, and outstanding lease obligations. I also want to highlight that the average net patient revenue in the first quarter was lower than the same period last year. There wasn't a single cause for this; we examined it thoroughly. It wouldn't surprise me if the rates increase moving forward, as they can fluctuate from quarter to quarter. However, a significant point is that the Medicare sequestration was in effect during Q1, costing us over $1 per visit. Since that was lifted in May, I expect our net rate to improve going forward. Another key point is regarding cash. As Chris noted, we currently have about $110 million in cash. We've fully drawn down our credit line of $125 million as a precaution. We're in compliance with our covenants under our credit agreement, and we have received Medicare advanced payments. Fortunately, our billings and collections have progressed on schedule, better than I anticipated; I expected delays but that hasn't been the case. Regarding the credit agreement, as we project, we might remain compliant by the end of the second quarter despite anticipated challenges. That said, we've been in regular discussions with Bank of America, who have been very supportive and are offering to include an amendment that will help us maintain long-term compliance. We plan to implement that in the next few weeks.

Okay, all right. Thanks, Larry. I know you have a lot of questions. Before we open for questions, we just want to talk about what we're comfortable discussing. So we certainly want to discuss the quarter and where we are right now. We want to try to avoid any future guesswork around looking forward or estimating things relative to this pandemic just because of the uncertainty. So, I appreciate your interest and understanding as we open the line. Thank you.

Your first question in queue is from Larry Solow with CJS Securities.

Good morning, Larry.

Good morning, everyone. It's great to hear from you all, and I hope everyone is doing well. I have a few questions. Clearly, volume has decreased significantly. While I don't want to look too far ahead, I'm interested in the current trends. Are you noticing any improvements today or slightly higher patient volumes as some restrictions ease? I'm curious if the changes you're seeing are primarily related to these restrictions and if there is a noticeable increase in patient demand. I understand there are different levels of urgency for therapy visits, some being essential and others more discretionary. I'm trying to get a clearer picture of the situation, particularly since you mentioned variations in volumes across different regions. For instance, it seems the Northeast has been impacted more severely compared to other areas. Could you provide a bit more detail on that?

Our volumes hit their lowest point around April 12 in the Northeast, which was affected more severely. A week earlier, volumes in the western and central regions also reached their lows. Since then, they have been gradually increasing each week. Throughout that period, many physical therapy surgeons were unable to see patients because their offices were closed, except for trauma cases, which are not elective. They were essentially inactive unless dealing with cancer-related surgeries or trauma. Recently, elective surgeries have started to resume, although the pace varies by location. For example, I learned just yesterday that in San Antonio, we received multiple referrals this week as surgeons have begun working in their surgery centers again. Currently, our volumes may not reflect the increase seen in referrals each week. The low volume isn't due to patient fear but rather the restrictions that were in place, as many healthcare facilities were labeled non-essential and were closed. Recovery will take time and differ from community to community and state to state, but so far, we've noticed continuous improvement week by week.

Overall, we've bottomed out at 45%. We've stated in the press release that we're running at 60%. As Chris mentioned, it ticks up each week. The good news is that referrals are growing faster than visits. So it should accelerate. In the models we did, we didn't assume we'd be at 60% at this point. So we are ahead of our financial models.

I think our Monday volume, and Monday is at the moment our busiest day, but every Monday is our busiest day of the week, and that was closer to 70% in both parts of the country this week. So it wasn't quite there, but it was close. So definitely picking up.

I urge investors who may not be aware to check our map on our website to see which states we operate in. We are not in California or New York, but we are present in states like Pennsylvania, Michigan, and New Jersey that have faced significant challenges. Being active in over 40 states and various communities has been beneficial, providing us with a diverse portfolio that has protected us from being overly affected by a limited number of locations.

You mentioned closing around 35 clinics since the last quarter or reopening them as part of your plan. Can you describe these clinics? Were they generally modestly profitable and taking business away from other clinics? What is the long-term strategy for making these closures relatively quick? Also, we've received questions about the put option; could you explain that again? Is there any risk for the company regarding terminated employees potentially requiring the company to buy the clinic back?

Well, remember we normally close, permanently close 20 clinics a year. And for the most part, the clinics we closed this time were one-offs. Some of them were very old. They either had some losses or were modestly profitable. And when we ran the math, if they come back and they're not running at what they were before, obviously they're going to lose even more money. Some of them had leases up for renewal anyway. Some of them were already dark, temporarily closed, and we didn't even have severance costs associated with it.

In aggregate, they were unprofitable.

Okay, so is there a risk? We've received this question from many investors and I want to clarify. Are there any risks related to our closed clinics, or from the termination of employees? Have we terminated any partners, or is there a risk from partners that might require us to buy back the clinic?

Yes. First of all, aside from one unprofitable site partnership that we decided to close, we haven't terminated any partners as a result of this. Thankfully, none of our partners have left us during this period either. Our deal structure allows a partner, after a set hold period of typically four to five years, to sell their interest back to us if they end their employment, and we are obligated to repurchase it. We have been fortunate because the vast majority of our partners, if not all, expect to remain for the long term. They believe, as I do, that the business will recover. While there may be risks, we are currently focused on managing our loan repurchase within our existing resources. Beyond that, we are diligently working through the situation, and our partners are doing the same, which is functioning as intended.

Great, thanks. I really appreciate the color, guys.

Your next question in queue is from Brian Tanquilut with Jefferies.

Hey, good morning, Brian.

Hey, good morning. Hope everyone is okay. I guess, I'll just follow-up first on Larry's question on the closures. So obviously, like you said, Larry, all these facilities are closed anyway, like you closed 20, 25 locations a year. But from a modeling perspective, should we assume that the drop in revenue for 2021 would be worse than your typical impact from the regular store or unit closures that you do most years? And I guess, my follow-up, Larry, would be just from a back-office perspective. Is there a corresponding decline that we should be modeling?

I'll be honest with you, Brian. I don't know how you would model 2021 at this point.

Yes. I can say that facilities that we have decided to close, we'll certainly lose visits and revenue from those facilities, but we won't lose profitability in aggregate. We're going to have to right-size our corporate office accordingly, we have today, and we'll have to keep it that way. But I agree with Larry. I don't know what '21 looks like yet.

That's very helpful and completely understandable. Regarding your earlier point, Larry, about the map, Tennessee is clearly one of your largest states. The state has been reopened for about two, two and a half weeks now. Could you walk us through the experience you've had with the ramp-up in those operations? Additionally, you mentioned that referrals are coming in at a higher rate than the volume growth. How are you planning to expand capacity to capitalize on this increase in referral flow?

Yes. So Brian, I'll handle that. So I couldn't be any prouder than I am of our team in Tennessee, our Star Group. Those guys have done a remarkable job. The leadership has been incredible. Responsiveness has been incredible. How they adjusted their staffing to the volume and how it was accepted. We're now ramping back up and doing it the right way. They've as a partnership found a way thus far to remain profitable through all this, even though their volume has been impacted just very significantly like everybody else's, but they're ramping back up. And I expect as we have the last really since the April 12 week, we've begun to pick back up. When we talk about new patients being ahead of our currently our volume growth, it's going to take a little time. Remember, we had such a low inflow of new patients during a substantial period, we have some patients that we need to discharge too. And so there is some balance between patients who have been hanging around for a while and it's time for them to go and the new patient inflow. And that's going to for a little bit mute on a one-to-one basis the growth of visits, but it's picking up. It's picking up nicely. It's picking up each week. And I can't predict even three weeks out at this point, I don't know. But so far, it's been steady for March.

No, that's very helpful. I guess, Larry, just housekeeping, I know you showed growth statistic, but would you be able to share the same-store numbers for the quarter is for the model?

I think, well, Chris gave it pre-COVID at 5.9. What was that?

5.9 pre-COVID. I know our overall volume for the quarter was 2%, but that's not necessarily same store.

Same store. I mean, honestly it would be, again, I would say it's apples and oranges. How can you compare March of this year to March of last year?

Yes, sir. Okay. Yes, no understandable. And then I guess, Chris, my last question for you, as I think about the same-store trajectory; if I look back into your business, you've definitely benefited from the strength of the employment fixture. And then as I look back to 2009-2012 timeframe, volumes were challenged during that time. How are you thinking about as we stare down to recession heading into 2021, how are you thinking about your volume outlook? And then I guess the other thing I would ask you is, as I look back to the last recession, rate growth was positive and that offset the volume headwinds. So obviously in the last few years, we've seen rate growth flatten out. So putting all those pieces together, how are you thinking about the revenue outlook for the business?

Yes, there is a lot packed in there. So...

Sorry.

That's okay, it's all right. Let's try not to miss anything. So you're right, we're in a flatter rate environment. I would say through from 2008 through 2012, there was probably I think a year or two where same-store was flat or even maybe in the worst of those slightly negative. We were able to eke out some same-store in the remainder of that period; may not, it wasn't as high as it is or has been in the business lately. Look we follow some strong economic groups that are predicting a recession in '21 or maybe and still maybe they are not right, we'll see. One of the things that we've learned here, and it's been interesting and it's been tough as well, but we know who our A-players are and we have tried our best. It's not perfect by any stretch, but we've tried our best to stay in touch, those people we forever stay in touch with our doctors who were at home and do this the right way. I know I have a lot of examples right now where we're getting calls from people who have referral base followings who have previously worked for somebody else, who were unceremoniously dismissed and nobody contacted them over a multi-month period and they're now looking to join our team just because they believe they will have a better long-term opportunity and work with the group that is able to care about them and the business that it brings. So I am in no way, shape, or form knowing what '21 is going to look like on a same-store basis. What I will tell you is we're very, very focused. This has been a greedy time, but we've gotten through the worst part of it. I think and I hope, and we're going to grind it out. And the other thing I'll say is our competition, we think about hospitals who have had their hands incredibly full and who are really interested in getting their surgery, their imaging, and those things back open again, maybe not as interested in PT, because that's a lot further down the line. So we compete with there. We compete with a lot of small practices, and we've got more resources that are focused on this business and both of those groups. So we may have to move some market share but we're ready to do that, we're going to work with that. So we'll see what happens. I can't predict, but we're focused on it and we're focused on overcoming at this point.

I appreciate it. I got it.

What I would add on to that is that eight of the 10 largest companies in the sector are private equity-backed and are levered five plus times to one versus our pre-COVID at 0.6 to 1. So in terms of financial strength and flexibility after this, I think we'll be in a much better shape than they will.

Larry, I think you mentioned that I guess, sorry for my last question. You talked about the leverage and your credit facility and covenants. I think you're showing in the filings, flexibility to be above 2.5 times leverage and then 1.2 times on the fixed coverage. So you know just walking us through how you're thinking about that and what the discussions are with the lenders in terms of your ability to adjust the covenants?

Well, I mean, we have $110 million in cash today, $125 million in debt. Normally, we would carry $30 million in cash. So that remains; maybe you could reduce your borrowings by $80 million if you do the amendments to the credit agreement. So I put it to $40 million to $50 million in debt. They were a little higher with operating losses during this period. I mean, the business has always thrown off cash flow. We've downsized including corporate costs; I think we're solid for the foreseeable future.

And we expect on the end of this to be able to grow again and then grow means organic openings and acquisitions and the other things that we've done and in maybe prior years before this outlook. So we expect to get back to that.

I appreciate that. All right, guys, thank you, and good luck.

Yes. Thanks, Brent.

Your next question is from Matt Larew with William Blair.

Hey, Matt.

Hey, good morning. How are you doing guys?

Good.

Larry, I wanted to ask a little bit about that last comment. And you've noted in a couple of case, you expect to incur losses during this time, but you also noted in the press release today that you like to identify about $87 million of annualized cost savings, and I think you said that 50% was ahead of your plan in terms of volumes. So could you just maybe give us a sense of that $87 million, what is sort of run rate savings on the back end of this versus things that you've been able to reduce with the lower volumes?

So the $87 million is if everybody we furloughed or terminated did not return to work. That's why I said it would be not indicative; on an annualized basis. So as we, as business gets better. We started to bring back clinical staff. I think we've added, brought 30 people back from furlough in the last couple of weeks. And we'll continue to do that. We've only brought back one person in corporate, down 40% in corporate. So again, we're going to size the business to what our run rate is. Our run rate is 10% or 20% or whatever less than it was before then we will have at least that much lower staff. But I mean I can't tell you what things are going to look like in June, much less at the end of the year.

Sure, okay. And then, I wanted to actually ask about, Chris, about Telehealth. Just what has the experience been like, are you getting paid for visits on Telehealth? Do you think longer term, this is a step change in the way that you're going to be delivering services? Yes, if you could help us there.

Yes, I don't think it's a step change. I think it's an added service. So there are times if we can all think back to what life was like three months ago when we were all on planes, trains, and automobiles, going around doing our thing and going to ballgames and doing all that. Sometimes delay happens and patients can't make it physically make it into the facility. On those occasions, a lot of those people might be able to do a Telehealth visit. Sometimes you just wake up and you don't feel good, or somebody who is a little bit older, they worry that they might be getting a cold so they're going to cancel. We can do a Telehealth visit in those cases. So, I don't expect that we're going to convert existing patients and say, why don't you do Telehealth. That's not the case, but there are going to be lots of times in circumstances and this period has been one of those magnified where Telehealth is really a nice adjunct to be able to get to somebody that you wouldn't be able to get to otherwise. And so the receptivity by the patients and our staff has been very, very high. We're going to continue with it. We are getting paid by the vast majority of our payers, including Medicare for our PTP facilities where we're in discussion about 50% or 60% of our facilities are certified, we have agencies. Medicare isn't currently paying for Telehealth for those facilities, which I'll be honest makes literally absolutely zero sense, but we, there are a lot of providers, select medical; many others were working those angles and finding that spike for that to make sense. We just found out this week that Blue Cross, Tennessee has decided Telehealth is going to be a permanent offering for them. And so for some, it's been indicated like Medicare that Telehealth is going to be for physical therapy, and other places that's going to have it before during this pandemic period, whatever that means. None of us know how long it's going to be, and then we're working on the beltway in DC and with CMS where that ultimately to be permanent. We think a lot of commercial carriers will allow it to be permanent, but it's uncertain on a complete basis as of yet.

And if this were to become permanent, is this something that would require some additional investment for you to scale up a platform, or has it been relatively easy plug and play for you or your clinicians?

Right now, we're completely plug and play and have had to make an investment. At some point, depending upon how this plays out, it won't be in the immediate or even near future. If we go to a different platform, it would require some investment, we would let you all know what that looks like ahead of that. But right now we're okay with where we are on the platform that we have, which is compliant with all the rules and regs and simple and easy to use. We're going to be on that platform for the foreseeable future without having to make an investment.

All right, that's great. And just a final one here. You mentioned the potential for M&A on the other end of this as many of your smaller competitors maybe are under pressure. Have you started to get additional calls already, or has the Medicare advanced payments and carriers' relief funds helped kind of stem the tide? And then the second piece may be just be in terms of new referral sources; a number of other non-hospital providers have indicated they've seen an increase in referral sources where smaller competitors have struggled. And I understand your referrals had been down but have you started to see that as the states reopened?

If I understand the question, referrals are picking up. I don't have an answer to that yet. The ability to tell whether we're getting a lot of new referral sources and whether where those referrals are coming from. And we do expect, one thing, and I guess this is a prediction or maybe an expectation, I think physicians who own physical therapy business, who have had to go home and sit and furlough these therapists. And I think some of those are going to look at that business and say it's really worth it because it's not their primary, they don't do it as well as they run their main business, the primary thing. So I think some of those are going to go away or will go into management agreements or other areas. But that's completely anecdotal. You know, the rest of it, I expect again, expect referrals to continue to pick up from a variety of different sources. One of the deals that we have on the sidelines right now focuses on managing physical therapy services, where we haven't had a background in that area and so we're anxious to get to the point where we can get that completed and focus a little bit more acutely on that. And then in terms of the calls, I have had some calls, and in fact, I've been asked to speak on to national widely distributed conferences such as Zoom-based kind of conferences, and obviously a part of that is what things look like post-COVID and how that will affect them. I've gotten calls from people that we've been in touch with over the period and they know we're not writing now, but at some point we are and we will be. And you know people I think are going to look at what they've been through, and a lot of them are going to want to be in a little bit of both, the ones that they've been in the storm sort. So yes, we'll see.

A couple of things, one, our hospital deal where we're looking at is an outpatient deal, not an on-site hospital management contract. And then I got a text from one of our team members that rehab agencies are 40% of the business, it's not 60%. PTPs are 60%, so 60% qualify for reimbursement from Medicare now.

Okay, got it. Thanks, Chris. Thanks, Larry.

Thank you. Thanks, Matt.

Our next question is from Mike Petusky with Barrington Research.

Good morning.

Good morning, guys. So, Chris, I was wondering just in terms of the, I guess, the patient experience and the PT experience in treating working with the patients whether it's changes to physical building changes in the waiting room, changes in terms of PPE. Can you just speak to what's different today versus two and a half months ago?

It's a lot different. You know, some of it's different. Some of it is obviously we are laying out our facilities in a way to continue to have distancing so that measure spread in terms of chairs and seating and glimpse in the gym area and pikes, where we have multiple pieces of equipment in close proximity. So it's that, it's scheduling and making sure that while particularly it's needed and while we can, we've got appropriate people spread through the day. In terms of PPE, it's now plenty of sanitization solutions and equipment to make sure after every contact things are worked down that we have plenty of hand sanitizer and masks. We were able through Graham's previous hospital connections and work that we were able to get when people were struggling to come up with meaningful quantities of that that will do us for the near term and may do us for the complete term of this. We'll see how long it will last, monitors, and other things. So, yes, there are differences. We continue to be able to be hands on with patients, patients are wearing masks now in our facilities, our clinicians and our staff wear masks and then otherwise we're building about our business and we're getting people better and we're able to do hands-on work, exercise based work and movement re-education and the pain intervention techniques; it's just like we were before. Just a little bit more involved in full preparation to pull off the right plan.

And I guess, Larry, just to follow up on that, the cost of any of that, whether it's cleaning material, PPE that sort of thing. I mean, does that reach materiality in terms of sort of the incremental spend there on billing? I mean obviously you had some spend, but I don't, I mean it depends on what you consider material. I don't think we spent $1 million on it.

I mean masks, what do masks cost us now?

It's about $0.46, Chris.

That's for masks. So despite there are some costs that's there, but when we talk about materiality, there will be a point I think I hope when we get through this, that we don't have masks. I think at that point, we'll know why volumes are right now, we're in this volume adjusted period where we have to do some other things and it's tough to predict exactly what that's going to look like over the next week or month or few months, but we're well positioned to get through it. We just need to get through it, few people protected and we will get out the other side.

Just real quick on, are you guys allowing multiple people to sort of be in the waiting room or are you having people sit in their cars as they wait to be called or is that sort of up clinic by clinic decision?

Yes, it depends on the size of the clinic; we have both large and small clinics. Currently, we are asking patients to come alone, without any companions. Most of our patients do not have to wait in the waiting room, as they typically check in and go straight back. Sometimes, those in the waiting area are drivers or other individuals. We are able to conduct intake over the phone as well, so waiting room issues are not significant. Some clinics are larger and could accommodate more people with appropriate spacing if necessary, but generally, our patients can check in and proceed without delay. If we ever face a more crowded situation, we could adjust by asking patients to wait a bit longer or return later to ensure safety. Our clinical team has done an excellent job prioritizing both our patients and each other, which has resulted in a significant decrease in exposures and a notable increase in volume. Just last week, we had only one person in short-term quarantine, a number that has dropped significantly from previous weeks. We are definitely moving in a positive direction and taking the right steps.

Yes, we've had a lot fewer confirmed cases than we'd ever imagined.

Great. Now just a question just on the Telehealth. In terms of sort of the volumes in April and May, I mean can you give any sense, even a ballpark range of what percentages of revenue in April and May were associated with Telehealth?

Yes, I don't know that I can give you Mike, a percentage of revenue. Graham, may be able to give us kind of an overview or a snapshot on the visits, and if we took a minute to do the math, or we do after the call; we can probably figure out; it's going to be a small percentage of revenue. But Graham, what we were doing a few thousand a week?

Yes. That's correct, Chris.

So about 3,000 a week. I expect Mike that number actually to begin to go down a little bit as the volume picks up in the facility and people are more readily able and capable of coming out or feeling comfortable coming out. I expect that number to wane a little bit. Again, I don't have good predictive ability to tell you what it should look like; but in the peak period we were seeing about 3,000 visits a week, I think.

Payers were essentially paying $100 per visit.

It varied among payers. There were some exclusions for certain services that can’t be provided through Telehealth, such as dry needling and manual therapy, which require a physical presence. Therefore, I wouldn’t say that a Telehealth visit is completely equivalent to an in-clinic visit since there are specific hands-on services that cannot be performed remotely. Generally, I believe codes were reimbursed at relatively the same level, including Medicare, but this was not consistent across all payers.

I have one last question that you may have already addressed, but I wanted to ask about the industry, CMS, and communications regarding 2021 pricing. Has there been any progress on that issue? Additionally, can you share any incremental or anecdotal information on this? Thank you.

Yes. I know there is a bill currently being discussed, and I have spoken with various organizations that have done a tremendous job. Our Select is involved with APTA QI, the Alliance APPA, the American Hospital Association, and several long-term care associations. They have united to urge CMS not to implement some of the reductions that were planned for 2021. We have a bill in progress with several sponsors, but I cannot predict the outcome at this point. However, considering the amount of relief and assistance we've received, the significance of the healthcare system, our essential role in it, and the recognition that we are ahead of many other healthcare and allied health professionals, I believe we have a good chance, but it's still uncertain.

Thank you.

Going back to the Telehealth volume question; if we were to maintain a rate of 2,500 visits per week indefinitely, as Chris mentioned, many of those patients would likely come in for in-person consultations, which may be an overestimation. We would expect to complete at least 750,000 visits in the quarter, which would represent approximately 3% to 4% of our business; therefore, it will not constitute a significant portion of your physical therapy visits.

The nice part is it should help to reduce our cancellation rate a little bit, and we should lose less of it by having that flexibility.

Got you. Sounds good. Thanks.

Thanks, Mike.

Our next question is from Kevin Gade with BAHL Gainer Investments.

Good morning, everyone. I want to thank management for their prompt actions and the clear communication regarding the 8-Ks. I appreciate it. Regarding your stronger financial position compared to others, I'd like to start with a question about capital allocation. What is your current priority? I understand you mentioned delaying M&A for a bit, and there's talk of potentially suspending the dividend for the next quarter. Could you provide more details on these points? Are you planning to suspend the dividend or proceed with payment? Also, how long do you expect to hold off on M&A? Thank you all.

So we've always said this, been very consistent; if you look at rates of return, the highest return is on a de novo clinic when we've opened ourselves. Second would be on acquired clinics, which in turn spin-off de novo. And then third, we said it was hard to judge whether it was better to do share buybacks or pay dividends. We initiated the dividend a number of years ago. We've increased it every year since; in this situation where there is so much uncertainty, we, like hundreds and hundreds of other companies, have suspended the dividend. Will we resume it at some point? I would expect. Will we pay one this year? We've already stated that we doubt that we would pay any dividends this year. And we've paid our first quarter dividend; we doubt we'll pay any subsequent dividends this year.

I think there is a good appetite by the board and certainly, the management team to get us in a position where we can re-institute that at a point where we feel comfortable that our capital structure is good and stable, and we can do everything we need to do.

And there are no further questions in queue at this time.

All right. Listen, thank you everybody. And it was a long call, I know you had a lot of questions. So, Larry and I are around, if you want to have some follow-up, we're available. We thank you for your time and your interest and your support. Take care. Have a great day. Bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.